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January 4, 2011 > World stocks ending the year with a whimper

World stocks ending the year with a whimper

By Pan Pylas, AP Business Writer

LONDON (AP), Dec 31 - Global stocks mostly fell Friday on the final day of the year as investors locked in recent gains to smarten up the look of their 2010 portfolios.

Despite the broad declines, most of the world's major markets have ended the year higher than where they were 12 months ago - a clear signal that the global economy has started growing again, albeit slowly, following the deepest recession since World War II.

Year-end trading is often complicated by traders closing out positions to present their portfolios in as good a light as possible. After all, bonuses are often dependent on how well those portfolios have actually performed.

In Europe, the FTSE 100 index of leading British shares closed down 71.07 points, or 1.2 percent, at 5,899.94.Despite the decline, it's ended the year around 10 percent higher. The CAC-40 in France fell 45.98 points, or 1.2 percent, to 3,804.78, meaning it has ended the year about 3 percent lower.

Germany's DAX was closed Friday, having ended the year Thursday around 16 percent higher at 6,914.19.

Wall Street was poised for another modest retreat at the open - Dow futures were down 23 points at 11,498 while the broader Standard & Poor's 500 futures fell 4 points to 1,250.90. If they end up flat, then the Dow and the S&P will end the year up around 11 percent and 13 percent respectively.

Despite a growing global economy and a rebound in trade, it's not all been plain-sailing for investors. A number of diverging concerns have occupied their minds over the last 12 months and many of the world's indexes

These range from concerns about mounting inflationary pressures in the wake of higher commodity and energy costs, less loose Chinese monetary policy and Europe's continuing debt crisis.

Earlier in Asia, China's Shanghai Composite Index closed up 48.50 points, or 1.8 percent, to finish the year at 2,808.08. That means that the Shanghai index has ended the year about 14 percent lower.

Investors in China have got increasingly worried in the last few months that the monetary authorities will have to take more aggressive action to cool the overheating economy and keep a lid on surging inflation. Last weekend's surprise interest rate hike, the second since October, provided further evidence that 2011 will not be as easy as recent years.

Hong Kong's Hang Seng index rose 36.11 points, or 0.2 percent, to end the year 7 percent higher at 23,035.45.

South Korea's Kospi ended the year on Thursday about 22 percent higher then at the start of 2010.

The most valuable stock market in Asia, Japan's benchmark Nikkei 225 stock average, ended the year Thursday 3 percent lower at 10,228.92, as investors worry about the impact on exporters of the rising yen - a higher yen makes it more difficult for the country's exporters to compete in international markets.

By mid afternoon London time, the dollar was down a further 0.3 percent at 81.27 yen, its lowest level since November 9. The dollar was worth around 93 yen at the start of the year.

Analysts believe that if the yen continues to strengthen, then Japan's monetary authorities may decide to intervene in the markets by buying dollars and selling yen. In September, that's exactly what the Bank of Japan did for the first time in six years.

The yen often benefits at the end of a year as Japanese companies repatriate assets back home for financing reasons.

Meanwhile, the euro was up a further 0.6 percent at $1.3362 as it continued to end the year on a buoyant note after German Chancellor Angela Merkel gave her backing to measures to shore up confidence in the currency.

``We must strengthen the euro,'' Merkel says in her televised message being broadcast Friday. ``This is not just about our money - the euro is far more than a currency.''

Andrew Wilkinson, senior market analyst at Interactive Brokers, said Merkel's ``call to unity'' has helped the euro drive up as 2010 draws to a close and ahead of Estonia's entry into the single currency bloc at the stroke of midnight.

That buoyancy has not been evident for much of the year though. By the middle of the year, the euro had fallen to a four-year low of $1.1878 in June, way down on the $1.45 level it started the year at.

It's been an extremely volatile year for the euro as it faced its biggest crisis since it was established in 1999 as huge debts in a number of countries came to the fore of investor concerns.

Greece and Ireland have both been bailed out by their partners in the European Union and the International Monetary Fund and the fear is that others may need to be rescued too. Portugal and much bigger Spain are the two considered to be the most at risk.

The prevailing view in the markets is that Europe may be able to support Portugal but that a bailout of Spain would test the limits of the existing bailout fund, potentially putting the euro project itself in jeopardy if governments don't put up more cash. Spain accounts for around 10 percent of the eurozone economy, compared with the Greece, Ireland and Portugal, which account for around 2 percent each.

Meanwhile, oil prices slipped further below $90 a barrel as investors took profits amid light year-end trading volume. Despite the fall, oil prices are set to end the year around 12 percent higher than where they started - a clear signal that the global economy has returned to growth following the worst recession since World War II.

By mid afternoon London time, benchmark oil for February delivery was down 32 cents to $89.52 a barrel in electronic trading on the New York Mercantile Exchange.

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AP Business Writer Kelvin Chan in Hong Kong contributed to this report.

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